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How Does Refinancing Work?

What happens when you refinance your mortgage? When you refinance a mortgage, you pay off the existing mortgage and replace it with a new one. Usually with better terms and mortgage rates; especially when compared to other types of unsecured credit.

If you’ve paid down a significant portion of your existing mortgage, refinancing can be used to not just pay off the original mortgage, it can also be used to make other purchases or pay off other debts as well.

Mortgage refinancing can be used as a form of debt consolidation. It can also be used for home renovations, travel, investing, buying additional property, or helping pay for tuition. Anything you want.

If you have a mortgage and are thinking of refinancing, you do not have to use your current lender. There are a lot of private lenders out there that can provide better terms and rates than Canada’s big banks.

Benefits of Refinancing Your Mortgage in Cambridge

There are a lot of good reasons why you should consider refinancing your home or property in Cambridge.

Lower Interest Rates and Payments

If interest rates on a new loan are lower than the original mortgage, you can save a lot of money over the life of the mortgage. It will also mean lower monthly payments. Refinancing a mortgage with a lower interest rate in Cambridge, even just half a percentage point, can add up. A monthly savings of $150 or more can have a big impact on a family’s budget.

Access Equity in Your Home

Refinancing a mortgage to access the equity built up in a property is one of the most popular reasons to refinance. Whenever you make a mortgage payment you build up equity. The more you pay off the more equity you have. If the value of the property has also gone up, chances are you’ve built up more equity in your house than you think.

When you refinance a mortgage, you can take out the equity in your home and add it to the current loan balance. Again, you can use that extra money to pay down higher interest debt, or use it to make purchases or investments. It’s your money, you can use it any way you like.

Shorten or Lengthen the Term of Your Loan

Have your finances changed since you first got your mortgage? If so, you might want to lengthen or shorten the amortization period, or length of time it takes to pay off the mortgage.

If your financial situation has improved, it might make sense to refinance a mortgage with a shorter amortization period. Paying more each month will lower the amortization period by five or more years, saving you tens of thousands of dollars in interest payments.

If funds are a little tight right now, refinancing a mortgage with a longer amortization period might be a good idea. Refinancing will free up some equity you’ve built up in your property. It will take longer to pay off the mortgage, but it could mean freeing up an extra $200, $300, or more every month.

Refinance to a Fixed-Rate or Adjustable-Rate Mortgage

When you refinance a mortgage, you can also switch to a fixed-rate or adjustable-rate mortgage. If you have an adjustable-rate mortgage and think rates are going to go higher, it might make sense to lock into a fixed-rate loan. Securing a low, fixed-rate loan will protect you from rising interest rates. A fixed-mortgage rate also makes it easier to plan your monthly budget.

If, however, you already have a fixed-mortgage and think rates are going to stay low or even go lower, you might want to look at switching to an adjustable rate mortgage.

Questions to Ask When Refinancing a Mortgage in Cambridge

Interest rates and amortization periods are important, but there is a lot more to consider when it comes to refinancing a mortgage if you live in Cambridge.

How Often Can I Refinance My Mortgage?

You can refinance a mortgage as often as you like. That said, different lenders have different guidelines but even that is often negotiable. There are costs associated with refinancing a mortgage, including switching costs and penalties for paying off a mortgage early. It’s quite possible that these penalties could eat up more than you were hoping to save. Ultimately, you may not need to refinance your mortgage every year but it’s still a good idea to, at the very least, review your mortgage annually.

Which Is Better: Refinancing or a Home Equity Loan

With terms like “refinancing,” “equity,” and “loan” being tossed around, it’s easy to think they are the same. But refinancing a mortgage and a home equity loan are very different.

Refinancing is a loan secured against the house. The existing mortgage is paid off and replaced with the refinanced one. The mortgage is paid in installments based on the terms and conditions you establish with the lender.

A home equity loan is often called a “second mortgage.” When you take out a second mortgage you borrow against the appraised value of the property, minus the outstanding balance of the primary, or first mortgage. A second mortgage does not replace the primary mortgage, it is in addition to it. It is a lump sum of money that you need to start paying back immediately. As a result, you end up having to pay two monthly mortgage payments.

A home equity line of credit (HELOC) meanwhile, is a revolving line of credit that lets you borrow against the equity you’ve built up in your home. You can use as much or as little as you like, and you only need to pay interest on the amount you use.

So, is it better to refinance a mortgage, take out a home equity loan, or consider a HELOC? It all depends on what your goals are. The mortgage refinancing experts at Canadalend.com can help you determine the best approach.

Canadalend.com, the Mortgage Refinancing Experts

If you’re thinking of refinancing your mortgage or its time to renew your mortgage, talk to the mortgage refinance experts at Canadalend.com. We’ll look at your current mortgage, your long term financial and lifestyle goals, and determine if refinancing your mortgage is the right path for you.

How can we get you better terms and rates with your mortgage refinancing than Canada’s big banks? Because the licensed mortgage professionals at Canadalend.com are independent, they have access to hundreds of different private lenders. Many even specialize is mortgage refinancing.

To find out what your mortgage financing options are, contact Canadalend.com today. Or apply online and a Canadalend.com lending specialist will help you set up an appointment for a free personal consultation at your earliest convenience.

As spring approaches, both the weather and the housing market are poised to thaw. The question that buyers and sellers will be asking is whether last year’s stagnant spring market was an aberration or the beginning of a trend.

Early reports from 2018 seem to position the housing market as being more in-line with profitable years like 2013 and 2014. While it’s a bit early to know for sure, the signs do point to this spring being more productive and generating more sales.

Spring Impact on the Housing Market

Spring usually drives property sales due to an increase in inventory as more people list their homes. As well, it’s a popular time for buyers as the new supply offers more options for them to find a home that fits their budget and needs.

Supply can effectively drive the market and the spring typically sees an influx of listings that motivates buyers to get out and shop for their first or next home.

2017’s Stagnant Spring Market

Last spring, the average selling price dropped and there were fewer transactions. The biggest decline was experienced by detached houses. The slowdown could be attributed to the lack of supply or economic factors. In addition, affordability might have been an underlying reason.

The 2018 Spring Market

This year’s optimism could be related to the arrival of new Canadians, many of whom are situated in the GTA and looking to buy a permanent residence. This will drive the market as will the completion of several major development projects. Markets like the GTA tend to rebound due to the population and the constant demand.

It’s fair to assume that the bloated rental market and the high cost of rent might motivate renters to shift course, propelling the market to greater heights in 2018.

It might not be a season of crazy gains but it will wake the housing market from its hibernation and could gain steam through the summer and well into 2019.

The biggest takeaway is that buyers and sellers shouldn’t wait another year. They should start the process and monitor the market in the coming weeks. Contact us today to learn more about the GTA’s spring housing market and to discuss the steps to mortgage pre-approval.

Searching for the right mortgage lender and terms can be an arduous process filled with questions and options. Most people aren’t inherently equipped with the knowledge required to navigate the road to mortgage approval. Applicants need to ask the right questions to an experienced mortgage professional.

Some of the common questions borrowers ask revolve around credit profiles, types of mortgages and what are some of the hidden costs and fees.

Credit Profiles

Most applicants focus on their credit score, thinking it will help determine the loan amount. In fact, an entire credit profile could impact an application, which includes payment history, debt load, and unpaid debts.  This profile helps paint a clear portrait of the applicant’s financial history and situation. If the profile is strong it can reassure the lender that a borrower can handle the loan.

Credit scores do matter to lenders but it is not the only aspect that can determine a mortgage approval or rejection. 

Different Types of Mortgages

There are a lot of different types of mortgages and it can get a bit confusing for first-time borrowers or even the seasoned pros.

Mortgage types include but are not limited to:

• Traditional mortgages (20% down payment, loan-to-value ratio)
• High-ratio mortgages
• Fixed rate mortgages
• Variable rate mortgages
• Convertible mortgages
• Open mortgages

Each mortgage has its own stipulations and terms so sit down with a mortgage specialist to determine which is best for your situation.

Costs and Fees

Mortgages contain a lot of fine print which can balloon the cost of your home. One of the costs is insurance that the borrower must purchase if their down payment is less than 20%. Other costs include taxes, processing fees (usually $200-300), lawyer fees and interest adjustment.

Borrowers need to be aware of all the costs and fees and make sure they are covered in their budget.

The best way to approach a mortgage application is carefully, thoroughly and with knowledge. Contact us to learn more about your mortgage options. We can walk you through the entire process and answer all your questions.

Owning a home is quite certainly on most people’s minds. But given the current situation of the growing real estate prices in the GTA, this may seem like a pipe dream to many. Purchasing a house for the first time, finding a bigger property, or even simply moving to a more desirable location could be out of reach financially.

Budgeting a large amount for something as significant as a home can be daunting, but here are some tips to help you save up.

Determine how much money you need

Take into account what you can afford to spend on mortgage payments, including potential maintenance fees and various other expenses. If you currently own a property that you will sell before moving, there will be equity from which to take. However, you also need to figure out where to live and the size of the home you need. Where you choose to lay your hat will be a major factor in the cost of your new house and what you need to budget.

Set aside some monthly funds

Tuck away a portion of every pay cheque you receive into a savings account from which you purposefully do not withdraw. Your income (as well as your spouse’s or significant other’s income if the home will be a co-purchase) also plays a significant role in the size of the mortgage you will be able to obtain.

Adjust your lifestyle

Cut back on unnecessary purchases and make some frugal adjustments to your lifestyle, if needed, such as packing lunches and dining at home, and skipping outside entertainment activities for now. This will help you sustain more of the money you earn each month to put towards a new home.

Mortgages are obviously in place because only the illusive one percent can possibly afford buying a home outright. That means the rest of people need to save up for at least the down payment, with enough left over and a steady stream of income to manage monthly payments and other regular bills, such as hydro and utilities. Simply set realistic goals and give yourself some time to make it happen.